Asset finance is a term that covers a number of different types of corporate finance. Asset finance enables companies to purchase assets essential for their companies to grow successfully. Paying cash for assets can be a significant drain on working capital. With asset finance cash flow is eased through regular payments over an agreed period of time.
Hire Purchase : This is the most readily available credit facility. You pay a deposit to the finance company who takes title of the goods direct from the supplier. Title is not then transferred to you until the end of the agreement. Hire Purchase agreements can be based on a fixed or variable rate.
Lease Purchase : This is practically identical to Hire Purchase, the only difference being that instead of paying a percentage deposit you pay a deposit as a multiple of the repayments. Again, Lease Purchase agreements can be based on a fixed or variable rate.
Finance Lease : With any finance lease contract the finance company takes full ownership of the asset and rents the goods to you over a predetermined period.
Operating Lease : The only difference between an operating lease and a Finance Lease is that the primary period rentals do not cover substantially all of the capital cost and hire charges. The asset then needs to be sold on at the end of the primary period to recover the residual value.